Irish discussion around climate change concentrates excessively on what can be done here in Ireland to reduce emissions, reflecting the focus of EU policy on territorial targets.

Economists do not like territorial targets – the earth has just one atmosphere and the least-cost policy is to cut emissions wherever it is cheapest to do so, and separate targets for each of the world’s 200 governments will not be optimal except by accident.

Anyway, the targets solemnly agreed at the UN-sponsored gatherings (the next is in Glasgow in November 2021) are unenforceable. Each country should do whatever it can, but the efforts of small countries are not really material – for every tonne of carbon emitted in Ireland, China alone emits over 150. But small countries which happen to be members of the European Union have extra leverage, since the EU has a collective climate policy and is the third biggest emitter, after China and the US.

The EU’s climate policy has its flaws, but they can be addressed. Readers of the Irish Farmers Journal will be familiar with the controversies around the measurement of agricultural emissions and the use of production rather than consumption as the basis of attribution to member countries. It is in Ireland’s national interest to seek improvements to measurement and attribution.

If the critics are right, Irish agricultural emissions are mis-measured because of the methane issue and because the production basis of attribution unfairly penalises food-exporting countries. But changes to EU practice would also be a positive contribution to better climate policy independently of national interest.

The attainment of global net zero emissions can be pursued in smart or foolish ways, and climate stabilisation can be delivered at costs much higher than is necessary, notably through a failure to place a proper disincentive price on emissions.

The prospects for a more coherent worldwide policy have improved with the defeat of Donald Trump but also with the adoption recently by China of a net zero target by the year 2060. This is later than climate activists would like but nonetheless marks an important departure.

Trump has set back climate policy not just in the US but also in countries such as Brazil where mini-Trumps have taken inspiration from a man who once described global warming as a conspiracy invented by China to damage the US.

China, the US and the European Union between them account for about 55% of global emissions. More importantly, they dominate world trade: no country has a secure economic future unless it enjoys a decent trading arrangement with all three.

Reality

The election of Joe Biden makes it feasible for the United States to re-engage with reality. If the three could co-operate, they could short-circuit the sometimes-farcical efforts at the UN climate summits to get 200 countries to agree even on aspirational and unenforceable emission limits.

The territorial limits make no economic sense anyway and the UN has no means of enforcement. But the Big Three could readily call the shots once they decide to adopt serious carbon charges themselves, as Europe has already done rather more than the others. They could tell countries with inadequate policies, “If you adopt a reasonable climate policy, you will enjoy favourable trade access and we will define reasonable.”

There are two areas in which the EU could lead an initiative to get the three to co-operate and impose their will on foot-draggers. These concern aviation and marine transport.

Due to out-of-date international aviation and maritime treaties, there are no excise duties on jet kerosene and marine fuels.

Between them, air transport and marine freight account for roughly 7% of worldwide emissions. Levying a carbon charge on the fuels they use would curb demand and encourage the development of alternative propulsion technologies.

The European Commission has already brought forward proposals for a new taxation approach for aviation fuel and should be encouraged to do the same for marine diesel and the other bunker fuels. At the consumption end, there is no justification for the total exemption of airline tickets from liability to VAT.

Interestingly, the United States, unlike Europe, does have an excise duty on jet fuel, albeit at the tiny level of one cent per litre.

Jet fuel in a normal market would cost about 60c, so this is way below where it ought to be – the Commission is thinking about a tax in the order of 30c/l phased in over a decade or so. Given the current travails of the air transport industry, there will be concerns about over-hasty implementation of a new tax policy. There should be excise too for marine diesel and countries unwilling to go along get the strong-arm treatment from the Big Three. Nobody else has the muscle to bully the foot-draggers.

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